Next PLC (LSE:NXT) has upgraded its full-year profit guidance after a stronger-than-expected start to the year, though it warned that disruption in the Middle East will continue to drive costs higher.
The FTSE 100 clothing retailer said full-price sales rose 6.2% in the first quarter, ahead of its 4.0% forecast and generating an extra £28 million of revenue.
That outperformance added £8 million to profit, lifting full-year guidance for pre-tax profit to £1.218 billion from £1.21 billion.
The difference was driven by "exceptionally strong" trading in the first five weeks of the year, before the outbreak of conflict in the Middle East disrupted international operations.
Sales growth has slowed sharply due to initial disruption, particularly overseas, but recovered towards the end of the quarter as delivery services normalised.
Despite the upgraded profit outlook, Next left its sales guidance for the rest of the year unchanged, expecting full-price sales growth of around 5%. The group said comparatives from last year will become tougher, particularly in the second half.
The company expects the conflict to increase costs across freight, energy and distribution, with the total impact now estimated at £47 million, up from the initial £15 million set aside when it posted full-year results in March.
These pressures are set to be fully offset through a mix of overseas price increases and cost savings, meaning no net impact on profit.
Next said it continued to assume that it will spend £510 million on share buybacks this year, potentially split with a special dividend or other capital return.